Vietnam:The 12 per cent credit growth target set for commercial banks this year is within reach, according to a central bank official.

Nguyen Thi Hong, director of the State Bank of Viet Nam's Department of Monetary Policies, said in a meeting with the media last week that by late July, the banking sector had achieved a credit growth of 5.3 per cent over late 2012 figures.

This marks a significant improvement over the previous months, Hong said.

She attributed the high credit growth to the central bank's flexible policies that have helped slash lending interest rates and encouraged credit institutions to push up lending activities.

"The credit growth target of 12 per cent set for 2013 was based on the country's economic growth and inflation. However, the central bank has not asked credit institutions to do any ways to promote their credit growth but it has insisted them to expand credit activities in ways that can ensure the credit security," Hong said.

However, she noted that to realise the year's growth target, lending by banks would have to increase by 1.3 per cent each month.

Housing stimulus

Referring to the VND30 trillion housing stimulus package launched by the central bank, Hong said commercial banks have already made arrangements to disburse 10-year loans with a maximum interest rate of 6 per cent.

Regarding bad debts, seen as a major hindrance to credit growth, Hong said the central bank was actively perfecting a legal framework to speed up their settlement.

"The central bank is ready to set aside funds for the refinancing needed to support resolution of bad debts and begin lending to projects in agriculture and rural areas."

Hong also stressed the need for relevant ministries and branches to seriously implement measures to improve the economy's capital absorption capacity and the market's aggregate demand.

For their part, banks should adjust their business plans, to make them suitable to the current situation and restructure their operations to become more effective, she said.

In addition to implementing the central bank's guidelines, most banks have tried to increase lending on their own initiatives.

The most popular ruse, of course, is to cut lending rates.

The Ho Chi Minh Housing Development Bank (HDBank) has decided to offer enterprises loans at just 8 and 8.5 per cent per year.

Its VND1 trillion (US$47.39 million) preferential lending programme, due to last until December 31, will apply to enterprises that want to borrow the money to supplement their working capital for production and trading.

Meanwhile, the Sai Gon-Ha Noi Joint Stock Commercial Bank (SHB) has launched a VND2 trillion credit programme to support individuals and households who want to buy houses, vehicles or develop production and trading.

Under the scheme, which will start in September, the borrowers will be offered loans at interest rates of 9.4 per cent per year if their salaries are being paid through their SHB accounts.

Those who do not have accounts at the SHB will be offered loans with the interest rate of 9.9 per cent per year.

From August 1 to September 22, Vietcombank has also offered personal loans at just 8 per cent per year.

The leaders of many commercial have said that they are ready to offer loans at low interest rates if they are able to able to determine borrowers are potential customers or good enterprises.

However, the preferential interest rates can only be applied to short-term loans since they had plenty of short-term capital, they said.

Cao Sy Kiem, chairman of the Small and Medium Enterprises Association, said that in addition to cutting the lending rates commercial banks should seek ways to cut input costs so that the low rates can be offered for longer periods.

This would create conditions for enterprises to access long-term loans that they need to restore production and other business activities, he said.

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